With the uptick in maximum loan amounts, reverse mortgage limits have also increased. What this means for you is that you can pull out even more ready cash for your needs In this article I am going to provide a review of the rules regarding reverse mortgages as well as why now is the time to take advantage of the changes.
Under Social Security Regulations, the cost of living allowance moved up by 5.9% effective the first of this year, BUT, a lot of people don’t know that food has gone up by 5.3% and the cost of fuel has gone up a whopping 30%. The 5.9% increase barely puts a dent into offsetting the increases I just mentioned. Additionally, inflation across the board for everything isn’t helping our seniors either. That is where a reverse mortgage and the professionals at 7th Level Mortgage come in.
Here are some reasons why you would want to apply today for a reverse mortgage. First of all the maximum loan amounts have increased and the limit on a reverse mortgage is $970,800 for all areas. What this means is that if you are in a very expensive in which to live, you can pull out more equity as a payment to you as a lump sum or on a monthly schedule. The choice is yours.
A reverse mortgage unlike a regular mortgage is one where the lender pays you via an advance on the equity you have in your home. Usually, the older one gets, the more equity you have in your home. That means you can access more ready cash for yourself, your children, and your grandchildren. The difference is you are still here and there is no need to go through probate after you have passed away. The money that is disbursed to you after closing is tax-free as well.
There are 3 kinds of reverse mortgages, single-purpose, proprietary, and federally-insured, aka home equity conversion mortgages. With all three types, you keep the title to your home. Another great part of this kind of loan is that it has NO impact on your Social Security or Medicare benefits.
There are fees and costs to obtaining a reverse mortgage. They include an origination fee (that is how the lender gets paid) as well as servicing fees over the life of the loan. For federally-insured HECMs, there may be mortgage insurance premiums as well. Over time, you will owe more because the interest is added to the back end of the loan and when you pass away or sell the home, the loan and the interest owing are due. Most of these loans are tied to an index, making the loan variable. However, you may want a loan with a fixed rate. Those are available also but only for HECMs. The loan officer at 7th level mortgage will be more than happy to discuss with you all the options that are available so you can choose the one that is most comfortable with. The interest on a reverse mortgage is not tax-deductible yearly until the loan is paid off either in full or partly.
If you signed the loan documents yourself and your spouse didn’t, he or she may be able to stay in the home after you pass away as long as the taxes and insurance premiums continue to be paid. Your spouse will not be able to take any more money however from the loan proceeds. If you want your heirs to keep the house instead of selling it, your estate would not have to pay more than the appraised value of the home.
The following are the factors that are considered to qualify for a reverse mortgage:
- Your age
- The type of reverse mortgage chosen
- The appraised value of the home
- Current interest rates and financial assessment of your willingness and ability to pay property taxes and homeowners insurance premiums. You will meet with a counselor from an independent government-approved housing counseling agency. The counselor will explain the loans costs and financial implications of obtaining a reverse mortgage.
There are payment options with a HECM:
- A single disbursement
- A term option: This means you will receive a set amount of money each month for a specific amount of time.
- A tenure option: You will receive a set amount of money as long as you live in your home.
- A line of credit: You can take out from the loan some of the proceeds as your needs change or a combination of monthly payments and a line of credit.
Call 7th Level Mortgage today to go over all your options and secure your future.